Government acts to tackle rogue lenders

BORROWERS will be handed greater power to challenge extortionate loans and credit agreements today in a clampdown on rogue lenders. The Government will introduce a new Bill in the House of Commons to strengthen the 30-year-old Consumer Credit Act.

Among the changes will be a new unfair credit test, which will allow borrowers to challenge unfair practices and terms and not just extortionate rates.

An independent ombudsman will also be established to let consumers challenge agreements without having the burden of going through lengthy and expensive court battles. The move should mean the recent court case where a couple managed to overturn a loan that grew from £5,750 to nearly £400,000 will be a thing of the past.

The Government will give the Office of Fair Trading improved powers to tackle rogue lenders and a more targeted licensing system will be introduced.

Trade and Industry Secretary Patricia Hewitt said: 'For most people credit is a useful tool for managing their finances. But misleading information and unfair action by rogue lenders are a real problem for vulnerable consumers. By empowering customers to challenge agreements and providing a more reliable regulatory framework and licensing system, lenders and consumers will have increased confidence in the UK's dynamic credit market.'

Teresa Perchard, director of policy at Citizens Advice, said: 'For too long it has been too easy to get a consumer credit licence and too hard to take them away or penalise firms for bad behaviour.'

The OFT also welcomed the move, describing the old regulation as outdated. Chairman John Vickers said: 'Reform is necessary to ensure that credit regulation is relevant to today's growing credit market, enabling more effective regulation of the credit industry and greater consumer protection.'